Aviation: Leaked papers show South African Airways received funding for voluntary severance packages for 3000 staff

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South African Airways (SAA) has received the outstanding funding due from the Department of Public Enterprises, the business rescue practitioners informed employees on Friday.

According to news24.com, the rescue practitioners could, therefore, complete part one of the payment of voluntary severance packages (VSPs) to cabin crew and ground staff.

It only relates to SA-based employees and excluded employees of the state-owned flag carrier’s subsidiaries like Mango, SAA Technical and Air Chefs, according to a letter dated 12 February seen by Fin24.

More than 3 000 former employees of SAA who opted to accept voluntary severance packages.
Part 1 comprises one month’s notice payment in lieu of notice; payment of the full entitlement of the accrued leave as at the termination date recorded on the signed voluntary severance agreement; a pro rate 13th cheque if applicable; and the 2019 salary increase backpay if applicable.

“Now that SAA has received the outstanding funding from the Department of Public Enterprises, the scheduled date of Part 2 payment on 19 February 2021 is now confirmed,” states the letter.

The Part 2 payment will consist of one week’s remuneration for each completed year of service; a VSP “top-up” if applicable; and a VSP incentive if applicable. However, the Part 2 payment will be made after SAA has obtained a tax directive from the South African Revenue Service (SARS), employees are told.

Therefore, in order to expedite the second payment, VSP applicants have to ensure they have a valid tax number and that their tax filing with SARS is up to date.

If the rescue practitioners opted to make the payments in one tranche, then the VSP payments would have been delayed by the receipt of the tax directive for all employees. Then, instead of receiving part of the payment on 12 February 2021, the payments would only have been on 19 February 2021.

Part 1 of the VSP payments to management, specialists and pilots will be made be made on 17 February 2021 and Part 2 on 19 February 2021, according to the letter.

The pilots who will receive payment, are those who opted for voluntary severance packages when they were offered in August 2020. They have, therefore, already effectively “exited” the company. After the finalisation process of the VSPs, SAA entered a section 189 retrenchment process.

The payment of the VSPs is also a separate issue to the 3-month full and final settlement agreement offered for salary backpay.

As for the 2019 13th cheque payments still due to pilots, according to the rescue practitioners it does not form part of the current VSP payment process. The rest of the SAA employees received their 2019 13th cheque payments already early last year.

Minister of Public Enterprises Pravin Gordhan recently told Parliament that, if all goes well, SAA could exit its business rescue process by the end of February this year. The rescue practitioners have to confirm a list of outstanding activities before they can file for a notice that the rescue plan has been substantially implemented.

Gordhan said he expects an interim SAA board will be in place for the next few months.
Finance Minister Tito Mboweni allocated R10.5 billion in his mini-budget in October 2020 for the implementation of SAA’s rescue plan. This does not include funding for a restructured SAA – apart from about R2 billion in working capital.

Gordhan told Bloomberg on Friday that South Africa has identified three equity partners for SAA and will make a decision on which one to pick in “the next month or so”. The search for a private-sector entity to help steer SAA to safety is key to the minister’s plan to revive the airline.

Ethiopian Airlines CEO Tewolde Gebremariam said during a recent CAPA aviation webinar that there is slow progress regarding cooperation talks with SAA.

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